Credit card debt is decreasing

Sunday

Jan 30, 2011 at 2:00 AM

he federal Credit CARD Act of 2009 was supposed to correct a variety of credit card issuer abuses. And by most accounts, it's done exactly that. That's been bad news for credit card issuers; according to the Federal Reserve, outstanding credit card debt, which had been at an all-time high of $975 billion in the last quarter of 2008, is now hovering at about $820 billion.

BY JEREMIAH HORRIGAN

The federal Credit CARD Act of 2009 was supposed to correct a variety of credit card issuer abuses. And by most accounts, it's done exactly that.

That's been bad news for credit card issuers; according to the Federal Reserve, outstanding credit card debt, which had been at an all-time high of $975 billion in the last quarter of 2008, is now hovering at about $820 billion.

Those aren't the kind of dollars that banks were happy to part with. So ever since the act's passage, they've been busy finding new ways to recoup those losses. And, as before, that means banks and credit card issuers are devising new and often quiet ways to separate you from your money.

These new ways are no surprise to Janet Caffo, director of consumer affairs for Ulster County. "It's like I always say, someone builds a 9-foot fence, someone else comes around with a 10-foot ladder," Caffo said Tuesday.

Caffo has gained a reputation as the "Frugal Queen" when she speaks to groups around the region. Her basic message is simple, though its implications are demanding: "It takes a lot of work to be a good consumer today."

And nowhere is this truer than when contending with credit card use.

As an example, Caffo said that while the new law was supposed to limit the marketing of credit cards to college students by requiring proof of income, students are able to use their student loan income as proof of income. "And there's no requirement in the law that says banks have to verify that information," she said.

Super-low promotional rates may last for 12 months, she said, but watch out on month 13 — rates have gone up to 18 percent on some cards, she said.

Perhaps surprisingly, a spokesman for the American Bankers Association in Washington sounded some similar themes to Caffo's.

"There's no question that with improved disclosures, things have only gotten better for consumers," Peter Garuccio said.

Garuccio said the combination of the economic meltdown in 2008 and the CARD Act the next year has been a one-two shot to the industry.

A lot of that reduction in balances was the result of issuers writing off bad debt, he said. It's also the result of people becoming more frugal in their use of credit cards, due especially to the meltdown.

The upshot has been a "flight to quality" — to consumers with strong credit histories. He said he expects that as banks get more comfortable with the law, credit will become more available, but at a higher interest rate cost.

However it all shakes out, Janet Caffo's advice seems timely:

"The big lesson to be learned here is that you have to read the fine print."